Company Pushes For Innovative Way To Reach The Middle Market

Securian Financial Group’s recent announcement to sell individual whole life insurance through the college savings service Upromise represents a new channel through which Securian hopes to sell simple-issue protection products to the middle market.

The partnership may foreshadow the distribution future of low-end, commodity life insurance products as financial advisors concentrate on more lucrative, holistic approaches to financing the futures life and retirement needs of American families.

“The Securian-Upromise partnership opens a new channel to underserved households,” said Bill Gould, second vice president for Securian Financial.

The deal, announced in October, had been in discussion for about a year. It involves no financial advisor at any stage of the whole life policy buying process. Upromise members simply click their way through to coverage, as you would through a simplified property-casualty product.

In an interview with InsuranceNewsNet, Gould added that the deal amounted to a “great diversification play for us.”

“We want to add partners that can add to that step,” into the middle market, he said. “We’re serving the different markets and we don’t want to leave the middle market alone.”

By some estimates, as many as 58 percent of households with between $35,000 to $124,000 in annual income are uninsured or underinsured for life insurance, so Upromise accountholders represent a big untapped opportunity, he said.

Securian Financial, which sells life insurance underwritten by Minnesota Life and Securian Life Insurance, is the first company to sell individual life insurance on Upromise, according to a Sallie Mae spokeswoman.

Upromise was created in 2001 as a way for middle class consumers to set aside a portion of retail purchases to pay for college or to reimburse college loans. The education and financial services company Sallie Mae bought the company in 2006.

More than 850 merchants, from electronics retailers to distributors of housewares, have a partnership with Upromise. Every time a buyer closes on a purchase, a portion of the sale goes into the buyer’s Upromise account to pay for school-related expenses.

Under the Upromise Life Insurance Plan, policyholders can choose coverage for adults or coverage for children. Child coverage doubles automatically at age 18, and fixed premiums continue into adulthood, according to Sallie Mae. Adult plans also have fixed premiums. Coverage minimums are $10,000 for children and $25,000 for adults.

The plan’s cash value grows and provides permanent protection as the policyholder ages, according to Sallie Mae. Policyholders can cash out of the plan or borrow against the policy to help pay for college.

Up to 5 percent of the Upromise Life Plan’s cash value – a dividend option – plus a portion of premiums may be credited into the policyholders’ Upromise rewards account for up to five years.

A $50,000 policy covering a 10-year-old child could generate as much as $198 in the Upromise account over five years.

The life insurance program, Sallie Mae senior vice president Charlie Rocha said in a news release, helps families save for college and protect family finances by offering them “peace of mind and options as their needs change.&rdquo;

Gould said entering into a partnership with a company like Upromise is a good fit because as consumers are thinking about financing a school education or how best to reimburse a college loan, their minds are on financial products. That’s when they are most likely to click on a life insurance offering, he said.

With no financial advisor involved, the cost of selling a policy is small, and Upromise earns a referral fee from Securian. Upromise will lead digital marketing efforts through email and Web-based marketing campaigns, and Securian will handle a direct-mail print campaign, Gould added.

With the sale of simple stand-alone protection products no longer economically viable for financial advisors, the question is which partnerships for a distributor of life insurance like Securian Financial make the most sense.

“The Securian-Upromise partnership opens a new channel to underserved households,” Gould said. “It provides easy online access to simplified issue, permanent whole life coverage for this large segment of the market.”

Securian has similar deals with its group life products, but this is a first for individual life policies, Gould said.

In 2012, there were 6.3 million purchases of individual whole life policies with a face amount of $560 million, according to life industry statistics. Sales of individual whole life premiums increased 6 percent in the first half of this year compared with the first six months of 2012, according to LIMRA.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].